The RMR Group Inc. Announces Third Quarter Fiscal 2018 Results
NEWTON, Mass.--(BUSINESS WIRE)--Aug 8, 2018--The RMR Group Inc. (Nasdaq: RMR) today announced its financial results for the fiscal quarter ended June 30, 2018.
Adam Portnoy, President and Chief Executive Officer, made the following statement regarding the third quarter fiscal 2018 results:
“The third quarter was marked by strong year over year growth in our business. The year over year growth in AUM, revenues, net income and EBITDA all largely came from our existing businesses. In addition, we recently made good progress in our stated goal of diversifying our revenues and AUM with the announced launch of the RMR Office Property Fund LP, our first real estate investment vehicle that is targeting private investors. Since June 30, 2017, we formed three new client companies in three different real estate businesses, all of which may lead to enhanced growth in revenue and AUM in the future.”
Third Quarter Fiscal 2018 Highlights:Total revenues for the quarter ended June 30, 2018 were $62.1 million, compared to total revenues for the quarter ended June 30, 2017 of $55.5 million. For the three months ended June 30, 2018, net income was $19.4 million and net income attributable to The RMR Group Inc. was $8.4 million, or $0.52 per diluted share, compared to net income of $17.6 million and net income attributable to The RMR Group Inc. of $6.9 million, or $0.43 per diluted share, for the three months ended June 30, 2017. Net income this quarter included $1.8 million, or $0.04 per share, of separation costs related to a former officer as well as $0.8 million, or $0.02 per share, of transaction and acquisition related costs. Net income for the fiscal third quarter last year included $1.8 million, or $0.04 per share, of transaction and acquisition related costs as well as $0.7 million, or $0.01 per share, of business email compromise fraud costs. The RMR Group Inc. earned management services revenues for the three months ended June 30, 2018 and 2017 from the following sources (dollars in thousands): For the three months ended June 30, 2018, Adjusted EBITDA was $28.5 million and Adjusted EBITDA Margin was 56.1%, compared to Adjusted EBITDA of $27.4 million and Adjusted EBITDA Margin of 57.2% for the three months ended June 30, 2017. Adjusted EBITDA Margin equals Adjusted EBITDA divided by the contractual management and advisory fees earned from The RMR Group LLC’s client companies. These contractual management and advisory fees are calculated pursuant to The RMR Group LLC’s contracts with its client companies and do not deduct non-cash asset amortization recognized in accordance with U.S. generally accepted accounting principles, or GAAP, as a reduction to management services revenues. Adjusted EBITDA and Adjusted EBITDA Margin are also calculated on recurring revenues and do not include incentive business management fees earned. As of June 30, 2018, The RMR Group Inc. had $30.0 billion of total assets under management, compared to total assets under management of $27.9 billion as of June 30, 2017. As of June 30, 2018, The RMR Group Inc. had $280.5 million in cash and cash equivalents on a consolidated basis with no outstanding debt obligations. On July 31, 2018, The RMR Group LLC entered into a transaction agreement pursuant to which it is committing to contribute up to $100 million and ABP Trust, or Portnoy Family Office, is contributing $206 million of owned office properties to a newly formed private open end real estate fund, the RMR Office Property Fund LP, or the Fund. The Fund will be a private, open end fund focused on the acquisition, ownership and leasing of a diverse portfolio of office properties throughout the United States. The Fund’s General Partner will be a wholly owned subsidiary of ABP Trust. The RMR Group LLC will manage the Fund and receive annual fund administration fees equal to 1.0% of Net Asset Value. In addition, The RMR Group LLC will receive property management fees equal to 3.0% of all rents collected from commercial real estate investments and 5.0% of costs of construction or any improvement at commercial real estate investments held by the Fund.
Reconciliations to GAAP:
Adjusted net income attributable to The RMR Group Inc., EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. Reconciliations of net income determined in accordance with GAAP to EBITDA and Adjusted EBITDA as well as calculations of Adjusted EBITDA Margin for the three and nine months ended June 30, 2018 to the three and nine months ended June 30, 2017 are presented later in this press release. Also, a reconciliation of net income attributable to The RMR Group Inc. to Adjusted net income attributable to The RMR Group Inc. for the three months ended June 30, 2018 and 2017 is presented later in this press release.
Total Assets Under Management:
The calculation of total assets under management includes: (i) the gross book value of real estate and related assets, excluding depreciation, amortization, impairment charges or other non-cash reserves, of the Managed Equity REITs and ABP Trust, plus (ii) the gross book value of real estate assets, property and equipment of the Managed Operators, excluding depreciation, amortization, impairment charges or other non-cash reserves, plus (iii) the fair value of investments of Affiliates Insurance Company, the managed assets of RMR Real Estate Income Fund and the equity of Tremont Mortgage Trust (TRMT), plus (iv) the contributed capital of and outstanding principal of loans serviced for certain private clients. This calculation of total assets under management may include amounts in respect of the Managed Equity REITs that are higher than the calculations of assets under management used for purposes of calculating fees under the terms of the business management agreements, which are based, in part, upon the lesser of the historical cost of real estate assets or total market capitalization. For information on the calculation of assets under management of the Managed Equity REITs for purposes of the fee provisions of the business management agreements, see The RMR Group Inc.‘s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. The RMR Group Inc.’s SEC filings are available at the SEC website: www.sec.gov.
At 1:00 p.m. Eastern Time this afternoon, President and Chief Executive Officer, Adam Portnoy, and Chief Financial Officer and Treasurer, Matt Jordan, will host a conference call to discuss The RMR Group Inc.’s fiscal third quarter ended June 30, 2018 financial results.
The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on Wednesday, August 15, 2018. To access the replay, dial (412) 317-0088. The replay pass code is 10121851. The transcription, recording and retransmission in any way of The RMR Group Inc.’s fiscal third quarter ended June 30, 2018 financial results conference call are strictly prohibited without the prior written consent of The RMR Group Inc.
About The RMR Group Inc.
The RMR Group Inc. is a holding company, and substantially all of its business is conducted by its majority-owned subsidiary, The RMR Group LLC. The RMR Group LLC is an alternative asset management company that primarily provides management services to publicly traded REITs and real estate operating companies. As of June 30, 2018, The RMR Group LLC had $30.0 billion of total assets under management, including more than 1,700 properties, and employed almost 600 real estate professionals in more than 35 offices throughout the United States; and the companies managed by The RMR Group LLC collectively had over 52,000 employees. The RMR Group Inc. is headquartered in Newton, Massachusetts.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. FORWARD LOOKING STATEMENTS CAN BE IDENTIFIED BY USE OF WORDS SUCH AS “OUTLOOK”, “BELIEVE”, “EXPECT”, “POTENTIAL”, “WILL”, “MAY”, “ESTIMATE”, “ANTICIPATE”, AND DERIVATIVES OR NEGATIVES OF SUCH WORDS OR SIMILAR WORDS. FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE ARE BASED UPON PRESENT BELIEFS OR EXPECTATIONS. HOWEVER, FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS, INCLUDING SOME REASONS BEYOND THE RMR GROUP INC.’S CONTROL. FOR EXAMPLE:MR. PORTNOY STATES THAT THE RMR GROUP INC., OR RMR, MADE GOOD PROGRESS TOWARD ITS STATED GOAL OF DIVERSIFYING REVENUES AND AUM THROUGH FORMING THREE NEW CLIENT COMPANIES WHICH MAY LEAD TO GROWTH IN RMR’S REVENUE AND AUM IN THE FUTURE. HOWEVER, THERE CAN BE NO ASSURANCE THAT RMR’S RESULTS WILL BENEFIT FROM THE LAUNCH OF THESE NEW CLIENT COMPANIES, OR THAT RMR’S EFFORTS TO GROW AND DIVERSIFY ITS BUSINESS IN THE FUTURE WILL BE SUCCESSFUL. IN FACT, RMR’S BUSINESS COULD BECOME SMALLER AND LESS DIVERSIFIED IN THE FUTURE. IN ADDITION, ANY FURTHER REVENUE STREAM DIVERSIFICATION THAT RMR MAY REALIZE MAY NOT IMPROVE ITS PROFITABILITY.
THE INFORMATION CONTAINED IN THE RMR GROUP INC.’S FILINGS WITH THE SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN THE RMR GROUP INC.’S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM THE FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE. THE RMR GROUP INC.’S FILINGS WITH THE SEC ARE AVAILABLE ON ITS WEBSITE AT WWW.SEC.GOV.
EXCEPT AS REQUIRED BY LAW, THE RMR GROUP INC. UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
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